Interview with Mary Laschinger

Mary Laschinger, Senior Vice President of International Paper, commented on Friday’s forming of a $US 1.5 billion-worth joint venture with the Russian forestry firm of Ilim Group.

Russia Today: First, let’s talk output: roughly 45% of what you produce goes to China, 30% to Russia and the rest elsewhere. How's that ratio likely to change now this deal's been inked?

M.L.: We would anticipate that ratio changing when we would be producing and consuming more of the total production within Russia, because the strategic plan for the joint venture is to invest in developing higher value products that will be consumed in the retail sector here in Russia. The exact percentage today is difficult to predict. I’ll just to share with you from our current operations in Russia. About 90% of what we produce in Russia today – which is higher value products – does stay in Russia.

RT: Russia's printing industry has suffered from Finnish competition in particular. Are we going to see more Russian magazines, for example, printed in Russia?

M.L.: For the printing industry you need a higher grade paper in order to print high quality print. With the production being domestic, for the importers – for the printers – I would believe that that would encourage investing in the printing sector, because that way they can purchase their raw materials domestically. So we would anticipate an improvement in that sector as well.

RT: You've spoken in the past of facing ‘cultural challenges’ in the three years it's taken getting into the Russian market. What exactly were they?

M.L.: First of all, I should like to tell you that we operate in many countries around the world, and cultural differences exist no matter what region of the world we operate in. We’ve spent a lot of time getting to know our partners. I think that the biggest challenge is that International Paper is a global company- and also very transparent, because we are a public company – versus the Russian Ilim company as being a private business. So it’s taken us quite some time to develop understanding of how best to proceed with the operation of the company. So we’ve worked through these things in the last year and feel very comfortable with where we are at and very confident that we will succeed.

RT: How safe will your shareholders be in terms of the return on these investment? You’ve paid the largest sum ever to get this deal sealed.

M.L.: Today, as you’ve seen in the press – Ilim Group generating about $US 400 MLN in 2007. It is already a significant return on the investment, so our shareholders, I think, will be in general very pleased with the investment approach that we’ve taken.

RT: International Paper CEO John Faraci said last month it's planning to increase its ownership in this JV. Potentially, one would assume, you would want to own the whole thing, wouldn't you?

M.L.: Well, we did an assessment of what we wanted to do in the region. It is a significant commitment by International Paper for this growth in the region, and we felt it was better with our interest to join in with Ilim Group who’s got a strong presence – they are the best paper company and the largest in Russia today. We felt that the two of us together could generate more value faster versus each of us doing this independently.